8/11/2019 NIL-Summary Aquino v&VI

1/2

V. INDORSERS

A. GENERAL INDORSERS

Warranties of a general indorser:1. the instrument is genuine and in all respect what it purports to be

2. the he has good title to it3. all prior parties had the capacity to contract4. that the instrument at the time of his indorsement was valid and subsisting (Sec. 66 NIL)

In addition:

engages that the instrument will be accepted or paid or both according to its tenor ondue presentment

engages to pay the amount thereof if it be dishonored and the necessary proceedings ondishonor are taken

Notes on Section 66

the indorser under Section 66 warrants the solvency of a prior party

the indorser warrants that the instrument is valid and subsisting regardless of whether he

is ignorant of that fact or not. warranties extend in favor of a) a HDC b) persons who derive their title from HDC c)

immediate transferees even if not HDC

the indorser does not warrant the genuineness of the drawers signature

general indorser is only secondarily liable

B. QUALIFIED INDORSERS

Warranties where negotiating by delivery or qualified endorsement:1. the instrument is genuine and in all respect what it purports to be2. the indorser has good title to it3. all prior parties had the capacity to contract4. indorser has no knowledge of any fact that would impair the validity or the value of the

instrument.Limitations of warranties:

if by deliveryextends only to immediate transferee

warranty of capacity to contract does not apply to persons negotiating public orcorporate securities (Sec. 65 NIL)

Notes on Section 65

a qualified indorser is one who indorses without recourse or sans recourse

recourseresort to a person secondarily liable after default of person primarily liable

a qualified indorser cannot raise the defense of a) forgery b) defect of his title or that it is

void c) the incapacity of the maker, drawer or previous indorsers. a qualified Indorsement makes the indorser mere assignor of title of instrument, relieves

him of general obligation to pay if instrument is dishonored, but he is still liable for thewarranties arising from instrument only up to warranties of general indorser

the warranty is to the capacity of prior parties at the time the instrument was negotiated.Subsequent incapacity does not breach the warranty

lack of knowledge of the indorser as to any fact that would impair the validity or the valueof the instrument must be subsisting all throughout

8/11/2019 NIL-Summary Aquino v&VI

2/2

a person Negotiating by Delivery warrants same as those of qualified indorser andextends to immediate transferees only

VI. PERSONS NEGOTIATING BY DELIVERY

Qualified Indorser Person Negotiating by Delivery

Every person negotiating instrument bydelivery or by a qualified endorsementwarrants that:

Instrument is genuine and in allrespects what it purports to be;

He has good title to it;

All prior parties had capacity tocontract;

He has no knowledge of any fact whichwould impair the validity of theinstrument or render it valueless.

Warranties same as those of qualifiedindorsers; and

Warranties extend to immediatetransferee only.

Person negotiating by mere delivery orqualified indorser

General Indorser

No secondary liability; but is liable forbreach of warranty

There is secondary liability, andwarranties

Warrants that he has no knowledge ofany fact which would impair the validityof the instrument or render it valueless

Warrants that the instrument is, at thetime of his indorsement, valid andsubsisting

Order of Liability

There is no order of liability among the indorsers as against the holder. He is free tochoose to recover from any indorser in case of dishonor of the instrument.

As respect one another, indorsers are liable prima facie in the order in which theyindorse unless the contrary is proven (Sec.68)

General Rule: One whose signature does not appear on the instrument shall not be liablethereon.

Exceptions:1. The principal who signs through an agent is liable;2. The forger is liable;3. One who indorses in a separate instrument (allonge) or where an acceptance is written on

a separate paper is liable;4. One who signs his assumed or trade name is liable; and

5. A person negotiating by delivery (as in the case of a bearer instrument) is liable to hisimmediate indorsee.